Chinese demand outweighs appreciating dollar

fine wool 14 micron closeup

In the same week that US President Joe Biden and Chinese President Xi Jinping met in San Francisco at the APEC summit, US and Chinese market forces also came face to face in the Australian wool market as the Eastern Market Indicator rose 2% week on week.

The fortunes of the wool market are tied to our trade partners, and from late last week the market’s momentum looked threatened by news out of the US.  An appreciation in the Australian dollar midweek after US inflation data showed improvement would typically impact affordability from a buyer’s perspective. Fortunately for sellers this week, Chinese demand was heightened and a reduced offering meant the fundamentals were strong enough to overcome exchange rate movements.

The result was all Merino categories improving and a 23ȼ increase in the Eastern Market Indicator (EMI) to sit at 1151 ȼ/kg. In US dollar terms the EMI finished at 748 ȼ/kg, 3.4% higher week on week.  Outside of the previously mentioned drivers, the national offering ended up 5k bales lower than initial estimates last week and this supply-side relief likely assisted as the pass-in rate nationally was down to 5.7%.  37,926 bales were sold this week nationally which was just marginally below the weekly seasonal average of 38,903. 

In Sydney, 18.5MPG rose 54ȼ  to 1498ȼ/kg and 17MPG increased 40ȼ to 1747ȼ/kg.  Further south to  Melbourne, demand was also strong, as 17MPG jumped 51 ȼ to 1736 ȼ/kg and 18.5MPG jumped 41ȼ to 1487 ȼ/kg.  The Western Market Indicator (WMI) rose 27ȼ to 1294ȼ/kg after another strong week.

Crossbred wool did not see the same bump this week, with Melbourne 26MPG losing 9ȼ  to 571 ȼ/kg.  As Investigated this week by Andrew Woods, Crossbred wool’s seasonal proportion of Australian auction volumes is at its smallest in September (which spurred on the most recent rally in pricing) and as we approach Summer, supply will be a dampener on crossbred prices through to the next Australian autumn.

Next week

Next week’s forecast offering is again expected to be around 45k bales nationally which would be a stark contrast to what markets typically handle this time of year (Figure 2). If the 45K offering eventuates then it will be an interesting test of demand. All three centres will be selling Tuesday and Wednesday.

Have any questions or comments?

We love to hear from you!

Click on graph to expand

Data sources: AWEX| Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Flock of merino sheep close up
Wool

The luxury goods complex

Fine wine is a luxury item with, it turns out, some quite good indicator series for the past couple of decades. In this article, we

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.